Trump-ism And East Asia

Alastair Newton argues that Donald Trump’s abandonment of the US-led international order and efforts to reshape global trade and finance do not bode well for economies in East Asia which may find themselves forced by Washington into a Chinese sphere of influence as part of a grand bargain with Beijing.

“Where others see positive-sum games generating gains for all, [Donald Trump] seems to see only zero-sum winners and losers. And now, in his second term, that worldview appears to be a primary driver of his foreign policy…. Understanding this zero-sum thinking helps to explain the Trump administration’s approach toward global trade, its acquisitive and extractive foreign policy, its friendliness toward many autocratic regimes and its hostility toward liberal democracies.”

Amanda Taub, The New York Times, 7 March 2025

China aside, East Asia has barely featured in the eight weeks or so since Donald Trump was sworn in as President of the United States. Yet, as the fundamentals of Trump-ism become increasingly clear (as summed up above by Amanda Taub), it appears inevitable that a number of economies in the region will soon be squarely in the firing line.

Aside from the revised steel and aluminium tariffs due to come into effect on 12 March, receipt of recommendations for reciprocal tariffs which Mr Trump has commissioned and which are due on 2 April may prove to be the trigger point. Just last week the US President fired a warning shot across the bows of South Korea, criticising it over its tariffs and even railing against CHIPS Act subsidies for a plant Samsung is building in Texas. No doubt he will soon return to one of his first term ‘bug bears’, which he revived during his election campaign, i.e. how much Seoul pays towards the cost of the US military presence in South Korea. Note too that South Korea is a ‘serial offender’ when it comes to trade surpluses — USD66bn with the US in 2024. Even if the South Koreans were to invest in an Alaskan LNG pipeline project, as Mr Trump has claimed they will, this would likely not be sufficient to get them off the hook.

While South Korea has attracted all of Mr Trump’s ‘red flags’, it is far from alone in being a probable tariff target:

• Vietnam, which had a record trade surplus with the US of USD123bn last year, is surely high on Mr Trump’s ‘hit list’, especially as its export growth to the US (and elsewhere) since 2019 or so has in significant part resulted from Chinese manufacturers relocating to get around tariffs on China itself;
• Taiwan, which had a trade deficit with the US for most of Mr Trump’s first term but which had the fifth highest surplus in 2024, may not be far behind despite TSMC’s commitment last week to USD100bn investment in the US;
• Similarly, Thailand (which has just crept into the ‘top ten’), Malaysia and Indonesia; and,
• Although the Philippines had a smaller surplus (i.e. around USD5bn) it may find itself coming under pressure over US security guarantees.

In fact, Singapore is alone among the larger ASEAN economies in having a (modest) trade-in-goods deficit with the US last year.

The threat of US tariffs is far from the only challenge facing Southeast Asia in particular. As The Economist wrote on 13 February, China’s continuing reliance on export-led growth means that “Southeast Asian producers are being hammered” thanks to a rise in Chinese exports to ASEAN economies of 24 percent over the past three years. As a result:

“In Thailand manufacturing production has fallen by 11% since December 2021. In Indonesia fears of mass layoffs in labour-intensive textiles abound. The industry lost 80,000 jobs in 2024.… The government thinks 280,000 textile jobs are at risk this year…. Stagnation has set in more broadly.”

Protectionist measures taken to date — and they are few thanks in part to a 2002 free trade deal with China and in part to consumer price sensitivity — have had little discernible impact. As The Economist concluded:

“Should Donald Trump ramp up tariffs on exporter economies like ASEAN’s, the bloc could find itself caught between an America which refuses its goods and a China which is displacing many of its own producers — leaving it bereft of a clear economic niche.”

All this being said, a narrow focus on trade and tariffs risks missing the bigger picture.

In a 7 March op-ed in the FT, Gillian Tett set out the case not only for believing that the Trump Administration is serious about a latter-day Plaza Accord — aka the Mar-a-Lago Accord — and is using tariffs in its pursuit, but also for why some Wall Street luminaries believe it could happen. Underpinning this belief is the thinking not only of Treasury Secretary Scott Bessent but also Stephen Miran, Chair of the Council of Economic Advisors, based on which Mr Trump seems prepared to put up with some economic pain now in order “to force a grand reordering of global finance and trade”.

Overall, Ms Tett’s article is persuasive…as far as it goes. Where, in my view, it risks falling short is in failing to explore how China is likely to see US efforts to effect “a grand reordering” which would, inevitably, be consistent with the Trump Administration’s perception of the US’s best interests. As I wrote in my 4 December note for Heteronomics on China/US, referencing a 26 November FT op-ed by Mr Bessent’s former colleague Shahin Vallée:

“To give Mr Vallée his due, he does acknowledge that Mr Bessent would have to overcome ‘significant obstacles’, especially that he would have ‘to restore the US government’s ability to co-ordinate policy at the international level. However, in my opinion he seriously underestimates how difficult it would be to persuade Xi Jinping in particular to abandon his very firm belief that the US is in permanent decline and to accept any ‘bargain’…which would have the US perceived as preeminent. With all due respect to Mr Vallée and Mr Bessent, we are not going back to the 1980s and this is simply not in Xi Jinping’s playbook.”

However, in the light of the tectonic shifts we are witnessing in US foreign policy, I am not as categorical today. Reflecting on Mr Trump’s now oft-stated desire for territorial expansion alongside both Vladimir Putin’s and Xi Jinping’s matching ambitions, the FT’s Gideon Rachman wrote as follows on 10 February:

“Such a world might be compatible with an uneasy peace between the great powers, based around spheres of influence — with the US concentrating on the western hemisphere, Russia on eastern Europe and China on east Asia”.

Since then, Mr Trump’s acceptance of the principle of quasi-Orwellian spheres of influence has been widely acknowledged, begging the question of just how influential the China hawks in the Trump Administration are, not least Secretary of State Marco Rubio.

Last month, the US State Department made some superficially minor changes to its factsheet on Taiwan. Beijing reacted predictably. But it may have misread the intention behind them. The Economist was not alone in wondering whether they signify that Taiwan is now seen by Washington as a pawn in a bigger game, i.e. a piece which Mr Trump would be prepared to sacrifice to secure Mr Bessent’s grand bargain with Beijing on trade and finance. This would be a deal which Xi Jinping might just find irresistible — especially as it could be relatively straightforward for him to renege on his commitments (as Beijing has done over Hong Kong) once Taiwan was safely in his grasp.

Taiwan may not be alone in this respect. In a 14 November article specifically about trade, The Economist’s ‘Banyan’ column opined that:

“As much as South-East Asia craves non-alignment, in practice it could be forced into choices that anger either America or China.”

However, US policy may be shaping up to leave ASEAN members and other Asia ex-Japan economies with no choice but to accept being firmly in Beijing’s sphere of influence.

As for Japan, there is a parallel here with another country lying offshore from a major continental landmass, i.e. the UK (which could, perhaps, be compared to Mr Orwell’s 'Airstrip One’ in Trump-world, possibly making Japan ‘Airstrip Two’). Both countries’ prime ministers, Shigeru Ishiba and Keir Starmer, had broadly constructive meetings with Mr Trump last month. But neither can assume either that their country is free from the threat of tariffs or that they still have a US security guarantee. Japan, at least, is certainly not making this mistake to judge from Industry Minister Muto Yoji’s lobbying in Washington this week. Other East Asian supplicants may well soon be following the path he is beating; but, very possibly, to no avail.

Note: This article was first published by ‘Heteronomics’ on 11 March and is reproduced with kind permission.

Photo by Daniel Trotta